EUR/USD still faces downside risks as market focuses on US inflation data
2025-08-12 19:12:22
On Tuesday (August 12), the EUR/USD pair exhibited significant intraday volatility, with rapid price increases, declines, and periods of consolidation. The pair dipped to an intraday low of 1.1600. Investors awaited the release of US inflation data, which could reshape market expectations for the Federal Reserve's interest rate policy.
The market forecast is for the Consumer Price Index (CPI) to rise 0.2% month-over-month in July, down from 0.3% in June. The year-over-year increase is expected to rise for the third consecutive month, reaching 2.8%. The core CPI is expected to remain stable at 0.3% month-over-month.
Despite persistent inflationary pressures, markets see a near 90% probability of the Fed cutting interest rates in September.
On the trade front, President Trump extended the truce with China for another 90 days to allow for further negotiations. Another focus is Trump's meeting with the Russian president on Friday, and the talks are expected to revolve around the ceasefire agreement.
In addition to the US inflation data, the Eurozone ZEW economic sentiment index fell from 36.1 to 25.1 in August. Later today, Federal Reserve officials will speak, which may provide more clues on monetary policy.
Francesco Pesole of ING stated in a report that the European Central Bank (ECB) does incorporate economic activity survey data into its economic assessments. If a decline in the ZEW index is followed by a decline in the IFO index (particularly the Purchasing Managers' Index (PMI)), some dovish dissent within the ECB could resurface. Given the ECB's lack of public communication in August and the current relatively benign inflationary backdrop, this scenario is more likely to become a focus in September. For now, the euro remains influenced by news from Russia and the US, albeit modestly.
Francesco Pesole believes that today's US CPI data will push the euro/dollar exchange rate back below 1.16; if Friday's summit between Putin and Trump yields few results, the exchange rate may even face the risk of testing the 1.150 support level.
Technical Analysis
(Source of EUR/USD 4-hour chart: Yihuitong)
On the 4-hour chart, EUR/USD is currently consolidating near the highs of its corrective phase. A break below 1.1611 could trigger a downtrend targeting 1.1520 and possibly even 1.1343. This bearish scenario is supported by the MACD indicator, as its signal line, while still above the zero axis, has sloped sharply downwards.
(Source of EUR/USD 1-hour chart: Yihuitong)
On the 1-hour chart, EUR/USD completed a downside breakout to 1.1611 before rebounding to 1.1679, forming a consolidation range. Today, traders should watch for a downside breakout, which could initiate a fifth downtrend targeting 1.1520. A brief retest of 1.1611 (from below) could lead to a further decline to 1.1444, with an ultimate target of 1.1343. This outlook is reinforced by the Stochastic indicator, with its signal line below 80 and trending downwards towards 20.
in conclusion
Under the influence of US inflation data, EUR/USD still faces the risk of further decline. If it falls below 1.1611, selling pressure may intensify; and if there is an unexpected CPI data, it may prompt the market to reassess its expectations for the Federal Reserve interest rate.
At 18:57 Beijing time, EUR/USD was at 1.1608/09, down 0.05%.
The market forecast is for the Consumer Price Index (CPI) to rise 0.2% month-over-month in July, down from 0.3% in June. The year-over-year increase is expected to rise for the third consecutive month, reaching 2.8%. The core CPI is expected to remain stable at 0.3% month-over-month.
Despite persistent inflationary pressures, markets see a near 90% probability of the Fed cutting interest rates in September.
On the trade front, President Trump extended the truce with China for another 90 days to allow for further negotiations. Another focus is Trump's meeting with the Russian president on Friday, and the talks are expected to revolve around the ceasefire agreement.
In addition to the US inflation data, the Eurozone ZEW economic sentiment index fell from 36.1 to 25.1 in August. Later today, Federal Reserve officials will speak, which may provide more clues on monetary policy.
Francesco Pesole of ING stated in a report that the European Central Bank (ECB) does incorporate economic activity survey data into its economic assessments. If a decline in the ZEW index is followed by a decline in the IFO index (particularly the Purchasing Managers' Index (PMI)), some dovish dissent within the ECB could resurface. Given the ECB's lack of public communication in August and the current relatively benign inflationary backdrop, this scenario is more likely to become a focus in September. For now, the euro remains influenced by news from Russia and the US, albeit modestly.
Francesco Pesole believes that today's US CPI data will push the euro/dollar exchange rate back below 1.16; if Friday's summit between Putin and Trump yields few results, the exchange rate may even face the risk of testing the 1.150 support level.
Technical Analysis
(Source of EUR/USD 4-hour chart: Yihuitong)
On the 4-hour chart, EUR/USD is currently consolidating near the highs of its corrective phase. A break below 1.1611 could trigger a downtrend targeting 1.1520 and possibly even 1.1343. This bearish scenario is supported by the MACD indicator, as its signal line, while still above the zero axis, has sloped sharply downwards.
(Source of EUR/USD 1-hour chart: Yihuitong)
On the 1-hour chart, EUR/USD completed a downside breakout to 1.1611 before rebounding to 1.1679, forming a consolidation range. Today, traders should watch for a downside breakout, which could initiate a fifth downtrend targeting 1.1520. A brief retest of 1.1611 (from below) could lead to a further decline to 1.1444, with an ultimate target of 1.1343. This outlook is reinforced by the Stochastic indicator, with its signal line below 80 and trending downwards towards 20.
in conclusion
Under the influence of US inflation data, EUR/USD still faces the risk of further decline. If it falls below 1.1611, selling pressure may intensify; and if there is an unexpected CPI data, it may prompt the market to reassess its expectations for the Federal Reserve interest rate.
At 18:57 Beijing time, EUR/USD was at 1.1608/09, down 0.05%.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
